Fitch lowers Calpine debt rating

NEW YORK (CBS.MW) -- Credit rating agency Fitch lowered its rating on Calpine's senior unsecured debt Wednesday given the "turbulent" conditions in the power generation market.

Fitch lowered Calpine's
C.PN, -0.08%
senior unsecured debt to "BB+" from "BBB-," or to a speculative rating from the lowest investment grade, and the convertible trust preferred rating to "BB-" from "BB." The company also remains on "rating watch negative," Fitch said in a press release.

"While the company's operating fundamentals are sound, the financial profile and business strategy is aggressive, and is not consistent with the current market environment," Fitch said.

The rating agency also assigned a "BB+" rating to Calpine's proposed offering of $400 million to $500 million of convertible debentures.

Calpine announced plans Wednesday to sell $400 million in convertible debt in a private placement but later boosted the debt sale to $1 billion, plus an over-allotment option worth $200 million. See Energy Watch.

Standard & Poor's also assigned a "single-'B'-plus" rating to the planned $400 million to $500 million issuance of convertible debentures Wednesday. It affirmed its "double-'B'-plus" corporate credit rating on Calpine and a "double-'B'-plus" rating on the company's existing senior unsecured debt.

Additionally, S&P affirmed a "single-'B'-plus" rating on $1.1 billion of Calpine's outstanding convertible debentures and said the outlook remains stable.

The latest news on ratings moves come just days after Moody's Investors Service cut the energy merchant and power generator's rating to "Ba1," its highest junk rating, from "Baa3" and said Calpine remained on review for further downgrades.

Calpine suffered from comparisons with energy trader Enron
ENE, +0.00%
last week. The energy merchant, which filed for bankruptcy Dec. 2, is the target of a plethora of lawsuits, and investigations by the Securities and Exchange Commission and Congress.

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